INSTITUTE FOR TECHNOLOGY AND

MANAGEMET
International Business 2009-11

GLOBAL OPERATIONS AND LOGISTICS

PROJECT
ON
WHY INDIA SHOULD BECOME A
GLOBAL HUB IN LEGAL
PROCESS OUTSOURCING
INDUSTRY ??

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Submitted By- GROUP - 6

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 ACKNOWLEDGEMENT

Before we get into thick of things, we would like to add a few heartfelt words for the people who
were a part of this project in numerous ways.

The completion of our project and the success of our efforts reminds us of indebtness towards
our faculty and guide Prof. B V Ramana Murty and Prof. Kawaljeet Matharu for their
valuable guidance and affectionate encouragement throughout the project. The work was
complicated and complex but the inspiration received from our teachers made the project
successful. Their rich experience and unending patience saw us through many unforeseen
hurdles. They helped us become more knowledgeable in this field.

Last but not least we also take this opportunity to thank all those who contributed directly and
indirectly through suggestion thoughts and presence during the completing of our project which
helped making it a success.

Submitted with regards.

Group – 6

Anandita Srivastava – 56

Jayanta Das – 49

Mudit Agarwal – 8

Nancy Chawla – 42

Naveen Buddepu – 43

Yogendra Singh - 46

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Background of LPO industry:
‘In 1991, with India running out of hard currency, Manmohan Singh, then finance minister
decided that India had to open its economy. “Our Berlin Wall fell … and it was like unleashing a
caged tiger … We went from quiet self confidence to outrageous ambition in a decade” [Tarun
Das, Chief Mentor, CII]. In the era of liberalization, the Indian economy moved from being a
moribund and a closed set-up to become a dynamic growing economy with an annual average of
6% growth between 1991 and 2005. This growth was led by many factors, the most important
being the growth in the service sector of the country. According to AT Kearney’s annual global
services index, India is the current global capital for outsourcing and offshoring with other Asian
destinations dominating the top five positions.
1. India
2. China
3. Malaysia
4. Thailand
5. Brazil
6. Indonesia
7. Chile
8. Philippines
9. Bulgaria
10. Mexico

The service sector in India accounted for about 56.25% of GDP in 2009-2010 and 52% of GDP
in 2004-05. In fact India’s service exports had more than doubled from US$ 25bn in 2003-04 to
US$ 60bn in 2005-06 and now accounts for nearly 37% exports.(1) According to the IMF report
in 2006, productivity growth in India has been strongest in services. Emphasis on strong growth,
privatization, foreign investment, and tax reduction provided the much needed acceleration to the
already emerging economy.

In this burgeoning sector, a major chunk of the service sector is constituted by Information
technology (IT) and IT-enabled services. The software services in Indian economy increased by
33% which registered revenue of USD 31.4bn. The outsourcing industry has been the stalwart in
achieving this growth. This rapid increase in growth is directly correlated with the technical and
critical aspect of the work being outsourced. An upward trajectory has been witnessed– moving
from back office operations to becoming more knowledge intensive in nature. In other words, the
movement has roughly been from BPO to KPO to now LP

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Legal Process Outsourcing:

LPO Industry, is ideally a second-generation vertical of Business Process Outsourcing (BPO). It

is the high value, high growth business that is rapidly being decoupled from the co-existence of
the BPO. Outsourcing of Legal processes is transforming into one of the most exciting and
interesting areas to work in. It involves working on projects related to top of the line legal work
outsourced from US and European countries to countries like India - to leverage upon the cost
advantage and to tap the abundance of skilled lawyers. It needs greater analytical skills, is more
subjective and is critical to the client’s business.

It is a very recent phenomena which has in few years gained huge momentum. The first firm to
do legal outsourcing in India was Bickel & Brewer in 1995 with its office, I&A International, in
Hyderabad. It dealt with digitalization of the legal documents and creating searchable databases.
Later on it hired lawyers to review documents produced in lawsuits. In 2001, GE was the first
company to offshore its in-house legal work in India. Since then a lot of companies have entered
the arena in one form or other.

The off shoring of U.S. legal jobs is already ramping up, as some experts predict that 79,000
lawyers' jobs are poised to move from the U.S. to countries like India by 2015.

SWOT ANALYSIS OF LPO INDUSTRY :

Strength of LPO industry:

1. Cost Savings- Legal employees in overseas markets earn 30–70 percent lower wages than
comparable employees in the U.S., allowing domestic firms to reap tremendous cost savings.
Infrastructure costs in India and other overseas markets are also significantly lower.

2. Round-the-Clock Operations - The 12-hour time difference between the U.S. and India
permits 24/7 operations. Offshore teams can work through the night, resulting in quick
turnaround time for pressing legal projects.

3. Access to Global Labor Pool - India, China and other offshore destinations offer a large,
trained labor force. India’s labor force is predicted to increase at an average rate of 15 million per
year, ensuring a large pool of qualified workers for law firms in the United States, Europe and
other parts of the world where the demand for labor is increasing.

4. Flexibility- Employing a combination of onshore and offshore talent allows companies to

tailor their capabilities in response to workload and client demands. LPO also allows domestic
firms to tap into global expertise that is lacking within the organization.

weakness of LPO industry:

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There are some complications faced by the LPO industry , such as:

1. Cultural Differences - Offshoring work to foreign markets introduces cultural and language
barriers that could hinder communications between onshore and offshore teams.

2. Communication Barriers - Many outsourcing ventures fail because of unclear expectations,

poor vendor responsiveness, a lack of understanding and ineffective governance. Companies
with multi-shore operations must dedicate time and resources to managing the offshore
relationship, diverting attention from core business functions.

3. Hidden Costs - In some instances, hidden costs undermine the cost benefits of outsourcing
work overseas. Hidden costs include vendor management, quality control, contract management,
employee turnover, vendor profit margins and increased operational costs.

4. Geographical Hurdles - Relinquishing control of complex legal processes to a party across

the globe can result in a loss of managerial control over people and processes. The practice of
employing remote workers also can increase certain costs such as travel and training

5. Confidentiality issues – When one organization is shipping its legal work off to a law firm
located in a faraway country, it is risking a breach of confidentiality. The law firm handling the
operations must have strict guidelines in place and provide proper training to employees to
ensure that they understand the requirements of the client. The firm must also have a stringent
background screening procedure in place, to ensure that only honest and dependable employees
are hired.

6. Using properly tested legal software – When the legal work is being carried out by using
special software packages, the software needs to be checked properly for quality issues. There
should be a searchable database that is constantly updated with categorized details about the
client operations handled by the law firm, including the billing information. LPO services can be
quite expensive compared to other fields of outsourcing. Clients do not take it kindly if they find
out that they have been overcharged.

Opportunities of LPO industry:

In terms of sheer opportunities, 2010 starts on a promising note. Some of the uplifting trends are
as follow:

a) As noticed earlier, English law firms are increasingly finding flavor with the Indian
service providers. If this trend continues, other European nations would soon follow suit
and there seems to be no reason why it should not, if the Indian vendors continue
performing upto the levels and clients’ expectations.

b) Another promising area is that of regulatory compliance related work. While it could be
some time before the finance industry returns to the pre-recessionary days of hectic deal
making. However, on the upside recession has forced many governments pull the strings
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 tighter and in the process saddling organizations with more compliances related costs.
This is another area where LPOs could find takers, as cost efficiency shall continue to be
the guiding light for efficiency driven economies.

c) Diversified client base. As explained earlier, once the UK firms traditionally considered
to be the most conservative in approach, start utilizing the services of Indian vendors, it is
only a matter of time before clients from other parts of the globe come calling.

Threats to LPO industry :

While there seems enough reasons to expect another good year in terms of revenue, there still
exists a few factors which need to be addressed to materialize projections into actual numbers :

1. The first in this line is the apparent rise in protectionism. If the State of the Union speech
by President Obama, is anything to go by- some of the clients might want to think again
before outsourcing services. Yet, as often repeated earlier, the pricing rationale behind
legal outsourcing is too obvious and strong to be ignored in favor of political goodwill.

2. Recession – It has been the cause of depression for a number of US companies.

According to American Lawyer magazine, profits per partner at Top 100 law firms
dipped by 4.3% and revenue per lawyer dipped by 1.2%. This has made offshoring
almost unavoidable for the Law Firms looking to offset their increasing cost.

3. Conflict-of -Interest-Law off shoring their work have an undisputed obligation to avoid
conflicts of interest. The vendors must have a set of guidelines similar to the US Law
Firms to track the issue of conflict-of-interest. They must have list of all the clients served
by them in the past and present. Any vendor chosen for the legal services should satisfy
the requirements under DR 5-105(E)

4. Data Security Measures-Firms off shoring must evaluate the security measures
implemented by LPO Vendors including IT, physical, and personnel security measures:

(a)Secure web access including Proxy/ Firewall NAT and network monitoring

(b)Biometrics access cards for employees; full time CCTV at workplace; and proper fencing.

© Availability of full-time security agents and training staff on the security measures.

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 4. Other countries -the another threat is the upcoming competition from other destinations
such as New Zealand, Sri Lanka, South Africa and Philippines. While it is some time before
they catch up with the already mature Indian industry, yet the competition looks like here to
stay for long.

Distinguishing aspects of LPO industry:

The LPO industry thrives on innovation, constant learning and development. A lot of emphasis is
laid on the fact that employees are regularly updated with information as well as required skills.
This education is not only limited to technical knowledge but also involves acquiring skills to be
able to operate in a global environment. Himanshu Arora, Global Head, Learning and
Development at CPA Global, in an interview told about the objective of providing training to the
employees. He said, “The education doesn’t pertain only to enhancing knowledge and skills but
also educate employees about how to deal with different cultures which helps in building fruitful
cross-cultural relationships. Best practical content is used, which is developed by the subject
matter experts to make the learning process an enriching one”. Another big LPO unit, UnitedLex
brings in two U.S. patent attorneys to train the lawyers and review their work. Thus, the
opportunity to learn in a consistent manner and with the company laying stress on this aspect
gives the employee required exposure as well as a chance of growth. Being a knowledge-driven
service it becomes imperative that the stress on learning continues throughout the service tenure.

Analysis Best Company/Practices: Aeren LPO

Aeren LPO is India’s leading legal process outsource provider. They follow the best practices of
LPO industry:

One Stop Shop: They provide a very cost effective, High quality, Secure, Technology Enabled
and Process Efficient Legal Outsourcing Services as “One Stop Shop”

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Best people Talent: They leverage their tenets of quality and innovation, the best people talent,
domain expertise and self sustaining process framework to deliver long term benefits and
measurable high value legal outsourcing work to their customers. This is made possible by
leveraging attorneys experience and training in accordance with the codes of professional conduct
and ethics governing the practice of law in USA and UK .

Act as a partner and not vendor: They focus on building deep and long-term relationship with
the clients by acting as strategic advisors and to provide them legal support, hence helping them to
add value to their business.

Substantial cost savings: Aeren LPO team of expert and fully trained lawyers provides high
quality legal research, drafting and legal support services at every stage of litigation. They deliver
value for money through their proven flexible and transparent delivery and engagement model.

Models of LPO firm:

There are four basic models of LPO firms under which the companies function in this domain.
They are as follows:

(1) Captive centres (when a large corporation starts its own centre in foreign country responsible
for its legal and business processing issues), captive centres formed by U.S./U.K. firms and their
subsidiaries (law firms in the U.S./ U.K are working with firms to India to set up subsidiaries to
provide legal and paralegal services for export purposes only. For example, Fox & Mandal and
ALMT Legal, two Indian based law firms, are teaming up with Patent Metrix, an Irvine-
California based law firm), joint ventures by U.S./U.K based firms and third party vendors
providing services to law firms and in-house counsel.

(2) Among these, research indicates that it is most difficult to maintain captive centres.
Capgemini, the French IT services & Consulting company, on the basis of Forrester research
found that the cost of starting and maintaining captives far exceeds the cost of hiring third party
alternatives and that 60% of the captives are struggling in India.

(3) Currently, third party vendors are the ones that have proved to be beneficial both for the
clients and the company itself. Whichever model it may be it is an indisputable fact that this
industry has huge potential. Between 1990 and 2005, the legal services industry grew at an
approximate annual rate of 6.75% and is expected to grow at 6% per year for the next decade,
2006-15.

(4) Also, different estimates made by different research entities present a picture that spells out
business and opportunities. Value Notes projects LPO to become a $640mn industry by 2010.
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While Evalueserve estimated revenue from LPO at $300mn by 2010. Forrester research
projected that legal outsourcing to India will reach $4bn by 2015.

Although these estimates are varied, they do give a sense of huge potential of business increase
in LPO industry in India. The biggest economy currently served by this industry – the United
States, has a huge legal services sector. According to US Census Bureau, the legal services
industry in the US generated approximately $184 bn in revenue in 2008. Even a small fraction of
legal work outsourced would translate into huge amount of business for offshore service
providers. Ron Friedman on the basis of a survey, “The Change Agenda: Looking Ahead”,
conducted by Rees Morrison and Aric Press came to a deduction that U.S. LPO spending in 2013
will be almost $2bn.

Growth in LPO Domain:

The LPO industry has in a span of few years seen major mergers and acquisitions, partnerships
and alliances. The first acquisition happened when Mysore-based Software Paradigms
International (SPI) India acquired the entire BPO/LPO clientele of Comat Technologies across
the US and UK, which was served by Comat’s Mysore-based operations. Such deals are
indicative of the pace of growth of the industry. Gavin Brier in his article “Recession”
“Depression” Unemployment” “Meltdown” “Crisis” … wrote “The IT industry took 13 years to
come to maturity, BPOs took half a decade and now LPOs are emerging in a big way.” Even
magic circle firms like Clifford Chance are taking interest in doing business in the Indian
subcontinent. Established LPOs including Pangea3, Jurimatrix and SDD Global have attracted a
significant level of private equity and venture capital. Big player like CPA Global has entered
into strategic alliances to further enhance their products thereby giving an edge to their services.
In 2008, CPA Global entered into an alliance with major electronic discovery software provider
Applied Discovery Inc., a division of Lexis Nexis. The relationship ensures that CPA’s clients
around the world benefit from a total review and e-discovery solution. Such tie-ups have played
an instrumental role in making LPO a fast growing business. Recently UnitedLex entered into an
alliance with Huron Consulting Group as well as Ocean Tomo, thus further enhancing and
enriching the quality of their services and expanding their market. In terms of mergers and
acquisitions, in 2008, Integreon acquired Datum Legal. CPA Global in the same year acquired
SVPG to strengthen formers’ presence in German market. In short, business deals in the LPO
space has made the industry grow from few vendors to more than 100 within a remarkable period
of time.

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Services Provided:

A plethora of services are provided by the legal offshore service providers. These services can be
categorized under two categories:

1.Manpower intensive functions – Such as legal transcription, document conversion, legal

coding and indexing, document review etc.

2. High-value services – They include patent and general legal research services like freedom-to-
operate search, patent assessment, patent portfolio management, statutory and case law research,
due diligence services such as technical, legal and financial analysis of companies for mergers and
acquisitions, and contract drafting and review of contracts.

Corporate legal departments are the major clientele of these afore-mentioned services. A key
consideration among corporations world over is the reduction of costs though not at the expense
of quality. Indian LPOs have, in such a scenario, provided cost-effective solutions while
maintaining expected or higher quality levels and in some cases even exceeded the quality
provided by in-house teams. A balance between cost-and-quality aside, there are other advantages
that vendors located offshore are able to provide to their clients. These include the benefits
emanating from having an effective 24-hour work day and more importantly, providing access to
a workforce that is keen enough to service tasks thought of as ‘mundane’ by in-house staff.
Adherence to operations methodologies similar to Six Sigma and compliance with global
certifications such as ISO 9001:2008 (Quality Management System) ensure consistency in the
quality of the work product delivered from an offshore location such as India. For mature and
stable providers of offshore legal services, the recession has only added to the business with
clients expanding the offshore teams who had been serving them either in a shared model or as a
dedicated team. As an example, one of CPA Global’s European telecommunication company
recently doubled the number of engineers performing patent research and analysis for them.

In this manner, the ‘recession’ has further enhanced its attractiveness and financial viability. The
present economic conditions have also made corporations, primarily the ones having large patent
portfolios, to look for ways to reduce cost (e.g. by abandoning unused segments) or generate new
revenue (e.g. by out-licensing/sale of patents). Large companies such as CPA Global, which have
multi-shore operations and services catering to patent monetization, have also gained from such
focus on the use of patent portfolios. .

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Conclusion:

LPO as an industry is quite different from other knowledge-based industries. The work done is
high on intellectual level and is also expertise-centred. As it is in the growing stage, one can
expect a lot of innovations happening. With the newly enacted LLP Act, it is expected that
international law firms will also be making foray into the Indian legal market. Sec 59 of the LLP
Act allows law firms to set up their business within Indian boundaries. Such firms will act both as
consumers and producers of trained force suitable for addressing the legal support needs of global
corporations. In that respect, the LPO industry and the international law firms will converge and
are expected to fuel the growth of each other. It is also expected that some international law firms
may also setup their own ‘captives’ that will address the offshore legal support needs of their
clients.

Knowledge intensive outsourcing functions such as offshore legal offshoring aka LPO have the
real potential of becoming indispensable tools in a corporate strategists’ toolkit. What is needed is
a ‘leap of faith’ to move from transaction-oriented client-vendor relationships to a relation that is
a true partnership. Anyone who has used an external provider for legal needs, offshore or
otherwise, knows that depth and ability to fulfill complex needs comes with time. The same is true
for work done by engineers and lawyers located offshore. Offshore companies that have healthy
client relationships and talent retention practices that actually work would be ideally placed to
grow into the role of such partners.

In spite of some drawbacks, the LPO industry is gaining popularity in Asian and South American
countries and many organizations in the US and Europe are willing to give this new industry a
try, in order to keep their all time agenda of cutting costs and multiplying profits moving on the
right track.

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References:

1.India 2007.Ministry of Information and Broadcasting Government of India.

2. Legal Process outsourcing: Can offshoring of legal services to India be both efficient
and ethical? Maya Karwande. Legally yours blog.
3. “Will tough economy push companies to outsourcing” David Hechler.
http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1202426925586
4. Legal Process Outsourcing (LPO)-Hype Vs. Reality. E-ValueServe.

5. http://www.kpoconsultants.com/knowledge-center/white-papers/84-lpo-industry-
looking-back-at-2009-lessons-for-2010.html..

6. http://ezinearticles.com/?Client-Concerns-in-the-LPO-Industry&id=2713568.

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